Institutions expanding investment in marginal US farmland: MetLife

Managing director Barry Bogseth tells Agri Investor that pension funds, insurance companies and private equity funds are widening the scope of their farmland interest as pressure on producers continues.

Institutional investors are increasingly interested in acquiring marginal-quality US farmland, often with an eye toward crop conversion or long-term recovery of the overall market, according to the head of MetLife Investment Management’s agricultural finance group.

Managing director Barry Bogseth told Agri Investor that land markets have stabilized in many regions of the country and MetLife has observed gradual changes in the behavior of investors such as pension funds, insurance companies and private equity funds.

As information about farmland markets has become more widely available, Bogseth said, these investors have remained interested in the highest-quality properties, but are also looking at lower-productivity areas and properties located further from end-markets.  Some such investors, according to Bogseth, are often examining marginal land to see if properties are well-suited to conversion to other crops offering more attractive returns.

“The types of buyers that are going into these marginal areas, we are starting to see an increase in the number of institutions that are doing that,” Bogseth said. “It allows the opportunity for those that are very bullish on agriculture and are willing to invest early and ride through – if there is a continuation of a downturn in land values – to be able to ride through that storm to get to the other side. They are ahead of the market by investing in those declining market areas.”

MetLife, which originated $2.9 billion across more than 400 global agricultural loans in 2017, has a total of $15.3 billion in cumulative exposure to the industry, which it says ranks it as the largest non-government ag mortgage lender in the US. Offering loans that typically range in size between $1 million and $100 million, MetLife also lends to food production, agribusiness and timberland companies located throughout the US, Canada and Latin America.

Agricultural loans offered by MetLife largely focus on providing long-term capital that can be used alongside other sources of shorter-term financing. Bogseth said that recently, MetLife has been approached by more banks that are looking to assist their borrowers in accessing additional sources of capital.

“Profitability has constrained some borrowers’ cashflows,” Bogseth explained, stressing the gradual pace of all changes in the agriculture market. “We are starting to see a little bit more of an increase in the number of opportunities coming from the banks, which is what we would expect to see because of where we are in the economic cycle.”